Small business is bouncing back, but needs 210,000 new jobs this year: Xero monthly index

Australian small businesses are tracking well in their recovery from the economic shock of the pandemic. However, the sector needs at least 210,000 jobs to be created this year to fully bounce back, fresh data from Xero shows.

Simon O’Regan, director of Earl Canteen — a group of six cafes across Melbourne’s business district — says finding skilled staff is “certainly a challenge”.

“The challenge is finding skilled or experienced people in the first instance,” he tells SmartCompany.

Accounting software company Xero has released a new small businesses economic recovery report based on data from its newly launched Small Business Index, developed in partnership with Accenture.

The report found that Australia needs around 210,000 small business jobs to be created by the end of 2021 to fully recover from the pandemic shock.

It also found that younger staff, women and casuals, as well as those working in customer contact industries — such as hospitality — are more impacted by job losses.

O’Regan says the hospitality has lost overseas students as well as the working holiday visa cohort due to the pandemic and the international border closure.

“Our team got smaller very quickly and we lost a lot of our experienced staff, and trying to recruit or build people back up again, is really starting from scratch,” he says.

But it hasn’t been an impossible challenge.

O’Regan says Earl Canteen currently has 52 staff working across its six locations, and while it may have lost some full time employees, it has made up for them with casuals.

“We’re taking a more flexible approach, and recruiting a larger cohort of casual staff members just to fill in the gaps,” he explains.

Xero’s small business index, which is based on the anonymised and aggregated data of over 300,000 customer records, paints a picture of economic health using four metrics: sales, jobs, payment times and wages.

The index increased 18 points to 129 in March 2021, up 16.5% compared to February 2021, marking the third consecutive month the index has been above 100.

Sales rose to a new high since the pandemic hit, recording an 8.1% year-on-year increase — just below the result for March 2020.

Jobs rose 5.3% year-on-year, making it the largest year-on-year growth rate since Xero began collecting the data in 2017.

Average hourly earnings for small business employees rose 2.7%, which was also the largest year-on-year increase since the pandemic hit.

Small business payment times also improved slightly in March, sitting at 22.8 days — down from 25.4 days in February last year.

However, wages are still below the pre-pandemic 2019 monthly average growth rate of 3.0%.

Overall, O’Regan is optimistic about CBD trading, saying he’s “pretty positive about the city”.

“I mean, you look around and everyone seems to be grateful at least, socialising with work colleagues again, there’s a good vibe in places.”